Working Capital Management

Online Business Loans: Compare Options and Get Started

Let’s face it: Getting funding can be a challenge. As entrepreneurs and small business owners ourselves, we know how long and tedious the process can be. Evaluating the different types of business loans and their individual rules alone can take hours, if not days, to untangle and decide which option is right for you.

But you don’t always have time to go through the a traditional loan application process. Getting a bank loan, in particular, can take weeks, and your loan request may not even be approved. Many banks aren’t interested in working with new businesses, even if they are growing. 

So, where do you go from here?

This brief but comprehensive guide aims to make deciding on funding sources from the web as simple as possible. We’ll highlight what documents you need, describe different types of online loans, and answer some common questions about typical eligibility requirements.

First: define what you need from an online business loan

Before you start comparing traditional lenders and other potential lenders, it’s critical to know why you need the loan and how much you’ll realistically need. In many cases, you already know why you need a capital loan. But in some cases, how much you need in the long run might be less obvious. For that reason, many business owners prefer a flexible funding solution. After all, even a solid business plan may need to be adapted for new opportunities or market conditions.

To pinpoint your ideal options, ask yourself these questions:

  • Is your need too urgent to wait for a business loan application?
  • Will you need more funding after this opportunity or challenge is solved?
  • How often do you anticipate tapping into financing options?
  • Do lengthy payment terms regularly squeeze your cash flow, but your customers pay on time?
Answering these questions now will help you narrow down your options and get you to the right solution faster.

What Documents Do I Need to Apply for Online Business Loans?

The documents required for an online business loan will vary from lender to lender, but having some key documents and information at your fingertips will help make the application process smoother and quicker.

  • Your business financial statements (profit and loss, income statement, business tax returns, and an outline of your expenses).
  • Your personal financial information, including the last three years of personal tax returns.
  • Your business license, number, years in business, industry, size, and other details.
  • Your business bank information, including statements for the last three months.
  • Your credit score.
  • Potentially personal credit score.
  • A copy of your business lease (if applicable).
  • Annual revenue (if applicable).
  • Business plan (if applicable).
  • Loan proposal (if applicable).
  • Customer information (if applicable).

Bank or government loans tend to have more stringent requirements. However, many alternative lenders focus on your business and personal information and may not need to see a business plan or loan proposal.

For invoice factoring solutions, for example, the company may focus on your customer’s creditworthiness rather than your personal financial health.

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5 Common Types of Online Business Loans to Consider

We can’t tell you what online business loan type makes the most sense for you. But we can give you background information on a few business loan options to consider, as well as pros and cons so you can make an informed decision.

1. Invoice Funding

Invoice factoring is a type of financing where a business owner sells unpaid invoices to a factoring company for fast access to funds. The business owner receives cash for the invoice amount, usually less any fees, ahead of the payment terms. The business owner’s customer, who is responsible for paying the invoice, instead pays the outstanding invoice amount to the factoring company according to the original payment terms. Invoice factoring also goes by the terms of accounts receivable factoring or receivable financing. (It’s important to note that this differs from invoice financing, where a factoring company still gives a business owner cash for their invoice, but the business owner pays back the invoice amount themselves, plus a fee. Find out how to choose between invoice factoring vs. invoice financing.)

Invoice funding isn’t technically a loan; business owners don’t have to worry about paying the money back because their customer pays the factoring company. You only need to apply online, submit your invoice, and get funded through the online platform.

There are several reasons why businesses find invoice funding to be an attractive access to capital:

  • Convenience and flexibility. There’s no need to stay locked in a lengthy contract to tap into funding. You only need to submit an invoice when you need more working capital.
  • Get funded in days. You don’t have to wait weeks for a loan application approval. Instead, you can get an outstanding invoice paid in days, months ahead of net terms. In other words, this option works well with urgent needs.
  • Easy to apply for. Many online invoice funding platforms have short online applications. At FundThrough, we use AI-powered features to accelerate the process. And if you use QuickBooks, the process is even easier; we just pull the data from QuickBooks into your application.
  • Keep your company debt-free. Since invoice funding isn’t a loan or equity financing, you don’t have to shoulder the burden of debt repayments or give up control of your company.
  • Non-dilutive funding. No need to give up any control of your business.

In the spirit of transparency, here are a couple of reasons businesses choose not to pursue this type of alternative financing:

  • Perceived customer opinions.  Some organizations are worried that this source of business funding will reflect poorly on their reputation and make a bad impression on customers. However, this isn’t true. Invoice funding is normal for many customers and in many industries. Furthermore, many companies use invoice funding because they are growing. (See how we work with your customers if that concerns you.)
  • Potential accounting difficulties. There is a misconception that it’s challenging to reconcile accounts using invoice funding. You can see how exactly to do this in our guide to recording invoice funding transactions.


If you think invoice funding might be a good fit for you, see if you qualify in two minutes or less.

2. Peer-To-Peer (P2P) Lending

As the name suggests, P2P lending is about asking your peers, rather than a financial institution, for financial help. “Peers” could be wealthy individuals who like your business model and are willing to invest in it.

The peer match is sometimes found online through a matchmaking platform. These sites look at more than a basic business credit score, as traditional business lenders have done in the past. They consider many data points to make faster assessments for smaller loans. These platforms typically rely on automated systems and algorithms to assess applicants’ creditworthiness, set loan terms, and determine interest rates.

You’ll have to fill out an application, and then different investors will assess your application to decide whether or not they want to fund you. Once your loan is funded, you receive funds to use to cover expenses or take on growth opportunities. Make your payments according to the loan agreement terms, and you’re all set.

There are some pros to P2P lending:

  • Reduced interest rates. Peer-to-peer lending may offer lower interest rates than some traditional bank loans, allowing for more cost-effective financing. Why does this happen? The main reason is that P2P lenders typically have lower overhead expenses than banks or credit unions.
  • Fast funding. Like with invoice funding, P2P lenders can often provide funding in a matter of days, whereas banks can take weeks or even months to approve and fund a loan.
  • Flexible repayment terms. As an alternative lending solution, P2P lenders may also offer flexible repayment terms that can be tailored to meet a business’s specific needs.
  • No collateral needed. Unlike traditional bank loans, peer-to-peer lenders use unsecured loans and don’t require collateral. 

Likewise, there are some cons to this type of lender: 

  • Higher rates than other forms of alternative financingWhile many P2P loans may have a lower rate compared to bank loans, there are many that can be higher than other forms of alternative funding. 
  • Limited fundingUnlike invoice funding, many of these types of lenders often can’t provide large sums of money. As a result, you may need to find another source of funding elsewhere.
  • Little oversight. There’s not as much regulation of P2P lending platforms as there is of traditional sources of working capital. 
  • It’s still a loan. The loan application process may be quick, but it’s still debt. If you want to steer clear of adding debt to your business expenses, you may want to look at other financing options.

3. Government-backed Small Business Loans

Two primary organizations for government-backed loans in North America exist: The Small Business Administration (SBA) for U.S. companies and the Canada Small Business Financing Program for Canadian businesses.

An SBA loan program provides working capital at competitive rates and lower monthly payments. There are several different types of loans, including unsecured business loans. They also have microloans that act as startup loans for small businesses. Businesses can borrow between $500 to $5.5 million depending on their size, credit history, needs, and other factors.

However, there are some things to consider:

  • It can take 30-90 days to get a loan, which is hardly ideal for urgent funding needs.
  • The SBA program will match you with their lending partners, such as banks or credit unions, based on your needs and area.
  • SBA loans have a 49% approval rate at small banks and a 25% approval rate at large banks.
  • You must first exhaust other financing options.
  • You’ll need an SBSS of 140+ or a personal credit score of 620+ to be eligible for an SBA loan.
  • Your business must be based and operating in the U.S.

Canadian businesses can apply for government loans through the Canada Small Business Financing Program. This type of funding is reserved for small businesses and startups who cannot generate more than $10 million in revenue. The interest rates are lower than with other funding options, hovering around 3%.

You can apply for a traditional business loan or a line of credit, and there is an option for an unsecured personal guarantee. This means if your company defaults, you will be responsible for repaying the loan.

Additional details on Canada’s loan program include:

  • It can take up to 90 days to have your loan application approved and receive funding.
  • The maximum loan amount is $1.15 million.
  • Only $500,000 can be used for leasing or purchasing property, equipment, and similar assets.
  • Only $150,000 of your funding can be used toward intangible assets.
  • You can apply for a $150,000 line of credit.
  • There is a 2% registration fee for both the loan and line of credit.
  • You must apply through a bank, caisse populaire, or credit union.

In both countries, the pros of government loans are:

  • Low-interest rates. These loans can be easier to pay back since the interest rates are lower than with other lenders.
  • Options for different businesses. The amount you can get funding for is usually somewhat flexible. And you can leverage both short-term loans and long-term funding.

There are many cons, however:

  • It takes a long time to get funded. If you need an immediate cash infusion, then this option likely won’t work for you.
  • There are strict repayment terms. Unlike with alternative lenders, repayment terms are less flexible and you may personally be responsible for repayment if your business fails.
  • The eligibility criteria are extensive. As a traditional funding source, businesses need to demonstrate a higher credit score, a sound business history, and other factors. This means more paperwork. But even for strong businesses, it can be challenging to get funding from this source.
  • Low maximum funding amounts. Depending on your business, you may need more than $1 million or $5 million. And even if you apply for these amounts, you may only receive funding for part of your request.

4. Small Business Lines of Credit

A line of credit means you are essentially given the option to dip into funding up to a set amount when needed. The balance can move easily up and down as you draw funds and repay them. You only pay interest on the portion of available funding that you use.

By loaning money this way, online lenders demonstrate their ability to better suit the fluctuating finances that often limit small businesses. A lender may still want to review your annual revenue and business credit history to approve funding. However, because everything’s done online, it will still be quicker than visiting a traditional bank.

Various banks and other online lenders will let you apply for a line of credit online. You’ll still have to provide information about your business, just like if you were applying in person, but the process is often expedited compared to traditional business loans.

There are some pros to using an LOC, if you qualify:

Low interest rates. It’s common knowledge that lines of credit are among the least expensive funding you can get.

Flexible cash flow. A primary reason many businesses choose a line of credit is because it is a flexible funding solution. They can dip into these funds when they need to and won’t need to reapply every time they need to finance a business expense or growth project.

A better lender relationship. When you have a LOC and manage it well, you can build a strong relationship with your lender. This means that you may qualify for a funding increase or better terms. 

Build your business credit. Not every LOC provides the opportunity for businesses to build their credit. But if your lender submits your account activity to relevant credit bureaus, you may see a spike in your credit score. This, of course, can help you tap into additional funding options.

Here are some cons to think about before applying:

  • Difficult to qualify for. For new businesses who don’t have several years of financials, it’s hard if not impossible to qualify for a line of credit. 
  • Lengthy process. Even for established businesses who want to raise the limit on an existing line of credit, it can take months along with piles of paperwork.
  • There can be hidden fees involved. Origination fees, draw fees, maintenance fees…the list goes on. It’s important to estate the total cost of a LOC before applying since the interest rate isn’t the only expense.

5. PayPal Business Loan

The PayPal Business Loan program gives you access to small business loans online with funds transferred as fast as the next business day. You can apply for competitively-priced small business term loans from $5,000 to $100,000 for first-time borrowers and up to $150,000 for repeat borrowers. The PayPal Business Loan program lets you choose repayment terms that are right for your business and repay automatically with predictable weekly payments. Loan terms range from 13 to 52 weeks depending on your eligibility and loan amount. You’ll also have peace of mind knowing that there are no late fees, no early repayment fees, and no processing fees through the PayPal Business Loan program.

The pros of the PayPal Business Loan:

  • Favorable eligibility requirements. To apply for this loan, you only need a FICO score of 580 or higher, a business history of nine months, annual revenue of at least $33,300, and a personal guarantee.
  • Fixed fee. Rather than pay interest on your loan, you will need to repay a fixed fee. So you know what to expect every month.
  • Quick funding. You may receive funding as quickly as the business day after approval.

And some cons:

  • No benefit for early repayments. Want to pay off your loan early? You can, but you will still need to pay that fixed fee at its designated time. This type of loan doesn’t allow you to save on repayments, even if you’re excellent at managing your money.
  • Short repayment schedule. You’ll need to make weekly payments on your loan. This short cycle can become a challenge for some businesses, especially those with seasonal or fluctuating revenue streams.

Put FundThrough to Work for Your Business

FundThrough helps small business owners navigate cash flow hurdles every day. See if you qualify for invoice funding – it’s free and only takes two minutes.


The amount of money a business needs to make to get a loan depends on the type of loan they are seeking and the lender. A traditional lender often bases its offer on your ability to repay. Meanwhile, alternative lenders determine your loan amount based on revenue or cash flow.

In general, loans can be as little as $500 or millions of dollars.

At FundThrough, we will fund 100% of an approved invoice, less a fee.

It can be, depending on the lender. Government-backed and bank loans are more challenging, especially for small businesses, new businesses, or startups. Alternative lending options, such as invoice funding, are often easier to apply for and provide faster funding.

The credit score you need will depend on the lender and the funding type. A bank loan may require a high credit score, perhaps around 620 or more. Alternative financing options may fund businesses with lower scores, sometimes starting as low as 500.

For invoice factoring options, your credit score isn’t as important as your customer’s.

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